I. INTRODUCTION

         Due to the economic crisis throughout the world; reactions towards inefficient
utilization of public resources have increased, accountability of managers on the
efficient and rational use of public resources has gained significance. Therefore
concepts like managerial responsibility, responsibilities concerning the programs,
society and the processes have been introduced in public administration.
        With Public Financial Management Law No. 5018; it is stipulated that public
financial management and control system in Turkey shall be re-structured, abiding by
the principles of accountability and fiscal transparency as well as principles of
effective, efficient and economic utilization of resources allocated to achieve the
targets set taking the strategic priorities and international best practices into
       It is aimed that the transition process to be adopted during the restructuring
shall be completed by the end of 2007, and as of the beginning of 2008 public
financial management and control system which is compliant to international
standards and EU practices shall be established.
       With this reform, important aspects of contemporary financial management
and control practices such as strategic planning, performance based budgeting,
managerial accountability, internal control, internal audit, transparency and reporting
have been introduced.
        One of the most important mechanisms of this newly established system is the
“internal audit” activity. Internal audit is stipulated to be performed in a systematic,
continuous and disciplined approach and in accordance with generally accepted
standards in order to evaluate and improve the management and control structures of
public administrations as well as the efficiency of risk management, management and
control processes of financial transactions performed in these public administrations.
       In this strategy document adopted upon the Decision of Internal Audit
Coordination Board No. 22 dated 05.11.2007, current status of internal audit in
Turkish public administration system is analyzed and certain elements which could be
regarded as the features of a roadmap for 2008-2010 period are included.

                            II. CURRENT SITUATION

       With Law No. 5018, Internal Audit Coordination Board (hereinafter referred
to as “Board”) is established as an independent and impartial organ responsible for
carrying out central harmonization function in internal audit area.
        The Board is responsible for performing duties such as the establishment of
internal audit in public administrations in accordance with international practices and
standards, ensuring cooperation with internal audit units, providing recommendations
in terms of taking the necessary measures for abolishment of irregularities and
corruption, improving the risk assessment methods, preparation and implementation
of training programs for internal auditors, determination of code of ethics to be abided
by internal auditors, evaluation of internal audit units within the scope of quality
assurance and improvement program.
       Activities carried out so far in terms of the establishment of internal audit
system are as follows:
      With Law No. 5436 published in Official Gazette No. 26033 dated
       24/12/2005, from the class of general administrative services, 1200 internal
       auditor cadres have been created for public administrations within the scope of
       general government, special budget agencies and social security institutions
       which are subject to Decree Law No. 190.
      It is also decided that as per the Council of Ministers Decree No. 2006/10809
       on the allocation of internal auditor cadres to public administrations subject to
       Decree Law No. 190, types and degrees of (720) internal auditor cadres
       shall be changed and allocated to said public administrations.
      With the Council of Ministers Decree No. 2006/10911 on the allocation of
       internal auditor cadres to local administrations, (588) cadres have been
       allocated to local administrations as per degrees.
      With Council of Ministers Degree No. 2006/10808 governing the procedures
       and principles related to additional payment to be effected to internal auditors
       within the scope of Decree Law No. 375; procedures, principles and
       amounts of additional payment to be effected to those recruited in internal
       auditor cadres in accordance with Public Servants Law No. 657 have been
      By-Law on Working Procedures and Principles of Internal Audit
       Coordination Board published in Official Gazette No. 25960 dated
       08/10/2005 regulates the working procedures and principles of the Board.
      By-Law on the Selection, Training and Certification of Internal Auditor
       Candidates published in Official Gazette No. 25960 dated 08/10/2005
       regulates the procedures and principles governing the selection and training of
       internal auditor candidates as well the examinations, duration and courses of
       the training program, procedures to be applied following the training and the
       internal auditor certificates which will be disseminated to the successful
      By-Law on the Working Procedures and Principles of Internal Auditors
       published in Official Gazette No. 26226 dated 12/07/2006 regulates issues

       such as the number of internal auditors as per administration, their
       qualifications, appointment, working procedures and principles, certification
       and grading.
      The appointments of internal auditors to the public administrations within the
       scope of Law No.5018 has started and Internal Audit Coordination Board
       has been informed that as of October 2007 totally 510 Internal Auditors
       have been appointed to 147 public administrations; 169 of which to general
       budget administrations, 187 of which to special budget administrations, 12 of
       which to social security institutions and 142 of which to local administrations.
      In February and May 2007, 204 internal auditors from 68 public
       administrations received six-week internal audit first level training in Ankara
       on general subjects with regard to the implementation of internal auditing
       activities. Following the completion of six-week second level training
       including other training courses on legislation which started in October 2007,
       85 internal auditors will be awarded with certificates and start internal
       auditing in their administrations.
      Also in October 2007, 117 internal auditors and in November, 75 internal
       auditors started their first level training.
        Apart from the above mentioned, following communiqués and guides have
been prepared and published with regard to the establishment and implementation of
internal audit system in public administrations:
      Communiqué on Principles and Procedures Regarding The Appointment of
       Internal Auditors (No: 1)
      Communiqué on Principles and Procedures Regarding The Appointment of
       Internal Auditors (No: 2)
      Public Internal Auditors Professional Code of Ethics
      Public Internal Audit Standards
      Public Internal Audit Charter
      Public Internal Audit Reporting Standards
      Principles and Procedures on Grading of Public Internal Auditor Certificates
      Common Working Principles and Procedures on Internal Auditors Working in
       Different Public Administrations
      Public Internal Audit Plan and Program Preparation Guide
      Risk Assessment Guide in Public Internal Auditing
       In addition to these, following draft guides have been prepared and planned to
be published in 2007 and 2008.
      Public Internal Audit Guide
      Quality Assurance and Improvement Guide in Public Internal Auditing
      Information Technologies Auditing Guide in Public Internal Auditing
        On the other hand, Twinning Project on “Alignment of the Turkish Public
Internal Financial Control System with International Standards and EU Practices”

which is financed by EU funds with a view to align financial management and control
system in Turkey with European Union norms and international practices was jointly
executed by Turkish Ministry of Finance and French Ministry of Economy, Finance
and Industry between 30 March 2005 and 31 December 2006.
        15 public administrations, 5 of which are pilot institutions were included
within the scope of the project. Legislation, administrative structure, data processing
infrastructure and human resources under the organization of Ministry of Interior,
Ministry of National Education, Social Security Institution, Middle East Technical
University and Ankara Metropolitan Municipality, which are pilot institutions, had the
chance to realize “on the spot” analysis.
       Other administrations included within the scope of the project are as follows:
Ministry of Energy and Natural Resources, Ministry of Health, Ministry of Public
Works and Settlement, Undersecretariat of Customs, Undersecretariat of Treasury,
Undersecretariat of State Planning Organization, Banking Regulation and Supervision
Agency, Capital Market Board and Turkish Court of Accounts.
        Hardware of 5 pilot administrations, Ministry of Finance and Internal Audit
Coordination Board as well as Computer Aided Audit Techniques Software (CAAT)
which will be used in the public administrations were purchased within the scope of
the project aiming at the establishment of technical infrastructure. Thus, efforts
towards the establishment of internal audit automation programs in pilot
administrations and provision of them to the other public administrations were
       The main objective is to put into implementation an internal audit activity
which is compliant to international standards through training of public internal
auditors with adequate knowledge and experience and increasing the quality of public
auditing practices.

                      III. STRATEGIC OBJECTIVES

    2.1 Establishment of internal audit units and implementation of internal

    2.1.1 Establishment of internal audit units
   Promptly establishment of internal audit units within the administrations
    where the internal audit unit does not exist, in compliance with the hierarchy
    determined in the relevant legislation
   Organizing the internal audit management as well as the position of the
    internal audit units in organizational charts so that effective execution of the
    internal audit activities can be ensured
   Appointment of the most eligible person as the chief audit executive
   Within the framework of determined cadres, appointment of internal auditors
    at required number, creation of extra cadres in the administrations with
    inadequate number of internal auditor cadres,
   Appointment of internal auditors with relevant expertise in public
    administrations which execute activities in more than one specialization area

    2.1.2 Completion of Legislation
   Preparation by Board of internal audit guide, quality assurance and
    improvement guide, information technologies (IT) audit guide, procedures and
    principles on postgraduate education of internal auditors abroad, auditing of
    units abroad as well as other arrangements that may be required; all of which
    are part of tertiary legislation and have not been published yet
   Preparation of internal audit unit charter, internal audit guide and guide on
    auditing of units abroad by internal audit units

    2.1.3 Implementation of internal audit
   In order to ensure that internal auditing activity is carried out in accordance
    with its original purpose and in a sound manner; clarifying the scope of
    internal audit within the agency as well as the roles of internal auditors and
    other personnel in internal audit, ensuring that these roles are generally
    accepted by all parties
   Reviewing the organizational structures, business processes as well as the
    management and control processes of administrations at first
   Detailed examination of the risk management processes of the administration
   Adoption of risk oriented approach with respect to the utilization of audit
   Preparation of 2008-2010 internal audit plan and annual internal audit program
    so as to start auditing in 2008

   With respect to the internal audit plans and programs which will be prepared
    for the first time, taking system audit, compliance audit, financial audit and
    performance audit order as basis
   In the administrations where internal audit is performed for the first time,
    detection of one or a few areas as “pilot auditing areas” rather than all areas;
    completion of the auditing in these areas in the first year by using all auditing
    resources for this purpose; and starting auditing in other areas on the basis of
    the lessons learned and experienced gained in this process
   Revealing the weaknesses and/or areas to be improved in terms of
    management and control process of the administration and preparation of joint
    action plans together with the managers of the administration with a view to
    realize the required improvements

   Monitoring whether the proposals (agreed upon with the administration at the
    end of the internal auditing processes and based on action plans) are put into
    practice as planned or not
   Regarding Information Technologies (IT) audits, starting the search for
    required IT auditors in the scope of existing employment facilities; planning of
    IT auditing so as to perform it together with other audits when IT auditing
    turns into an applicable process
   Conduct of reassurance and consultancy activities hand in hand1

    2.2 Monitoring the internal auditing activities

   Establishment of an internal monitoring mechanism (such as the appointment
    of audit supervision officer) to monitor whether the internal audit performed
    by internal audit units comply with the regulations specified in related
    standards, legislations and guides or not
   External evaluation to be made by the Board (once in five years at the latest
    and in the scope of quality assurance and improvement guide) for each internal
    audit unit on whether the internal audit is performed in line with the
    regulations specified in related standards, legislations and guides
   Consolidation by the Board of the results of internal auditing activities to be
    performed in the public administrations; and making evaluations and
    explanations on the frequently encountered problems and best practices

   1
      Reassurance (auditing) service rather than consultancy service should be given importance
    during internal auditing activities. However, in the new system to be established in line with
    the fundamental changes made in the financial control and management system, consultancy
    service of the internal auditing activity should be emphasized in the initial phase so as to
    provide assistance to the administration in the establishment of the processes and the controls.

       2.3 Improvement of Internal Audit

       2.3.1 Improvement of internal auditing activities
      Preparation of a glossary to ensure “unity of concept” (conceptualization) and
       to ensure use of the same jargons by the executers in internal auditing
      Use and generalization of computer-supported auditing techniques in internal
      Continuous evaluation of regulations related with internal audit; and revision
       of related legislation by taking into consideration the international
       developments in this field
      2.3.2 Increasing the Number and Improving the Quality of Internal
      Providing the internal auditors with a minimum of 100 hours of on-the-job
       training (apart from the certificate program) as per related legislation on a
       three year basis and in a regular way
      At the beginning, conduct of trainings in the required areas by outsourcing or
       by professional personnel employed in other internal audit units; in the
       following phases, detection of potential trainers among internal auditors and
       creation of its own trainer staff by each internal audit unit by encouraging
       participation of said internal auditors in the “training of trainers” programs
      Co-operation with people and agencies producing academic works on internal
       audit; and encouraging the production of similar works in this field
      Paying of study visits in the scope of specific programs to the countries which
       are role models in internal auditing area
       2.3.3 Strengthening of institutional capacity
      Strengthening of the institutional capacity of the administration in a way to
       perform central harmonization function in line with the present and foreseen
      Inclusion of the Board and internal audit units in the organization laws
       2.3.4 Raising Awareness on Internal Auditing
      Organization of information meetings, workshops and seminars by the Board
       and internal audit units to make the heads of public administrations understand
       and adopt internal audit
      Preparation of handbooks and brochures on “What is internal audit?” and
       “How to perform internal audit?”
       2.4 Harmonization and coordination of internal auditing activities
      Transforming the Board into an excellence center and establishment of
       required communication network with the aim of detecting and generalizing
       the best practices in internal auditing and immediate announcement of these
       best practices to all related authorities

   Establishment of close cooperation between the Board, internal audit units and
    other audit units to detect common policies; to decide mutual roles and
    expectations; and to solve possible problems

                                 IV. SWOT ANALYSIS
    4.1 Strengths
   The Board has an inter-ministry structure
   The experience and motivation of the Board members is quite high
   First and secondary legislations on internal audit have been completed
   Internal auditor cadres decided in the scope of the administrations’
    requirements have been allocated
   Most of the auditors have been appointed
   Internal auditor certificate training has started
   A Twinning Project has been completed in the scope of pre-accession financial
    assistance, with the aim of supporting the implementation of Law No 5018
   Internal auditors appointed as per Provisional Article 5 have a big experience
    and strong auditing culture
    4.2 Weakness
   Internal auditor appointments have not been realized in some administrations
   Internal auditing activities have not started yet
   The infrastructure of internal audit information technologies is not spread
   Tertiary legislation has not been completed yet
   Administrations have a weak administrative and institutional capacity
   Some incompatibilities exist between internal audit legislation and EU norms
    and implementations
   It is possible that appointed auditors may pursue traditional audit paradigm
    4.3 Opportunities
   EU harmonization process and the structural changes required by this process
   Negotiations on financial control chapter (Chapter 32) covering internal audit
    as well has started
   Efforts to make changes in public administration continue
   Management cadres in public administrations are composed of young and
    educated people
   Comprehensive international knowledge on internal audit
    4.4 Threats
   The possibility that EU process may halt sometimes
   Heads of administrations and the units to be audited are not conscious enough
    on internal audit
   Public administrations are reluctant in terms of auditing activity


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